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HomeMy WebLinkAbout2118CITY OF KENT, WASHINGTON ORDINANCE NO. r r I AN ORDINANCE relating to the water supply and distribution system of the City; specifying and adopting a system or plan for making certain additions and betterments to and extensions of that system, and ordering it to be carried out; declaring the estimated cost thereof as nearly as may be; providing for the issuance and sale of $2,000,000 par value of "Water Revenue Bonds, 1978," for the purpose of providing funds to carry out that system or plan, for completing the system or plan specified and adopted by Ordinance No. 1967, and for other system purposes; fixing the date, form, denomination, maturities, interest rates, terms and covenants of such bonds; amending Section 9 of Ordinance No. 1178; confirming the sale and providing for the delivery of such bonds to Foster & Marshall Inc. of Seattle, Washington. WHEREAS, the City has heretofore issued under date of May 1, 1963, pursuant to Ordinance No. 1178 its "Water Revenue Bonds, 1963, Issue No. 1," in the principal amount of $327,000 for the purpose of refunding the then outstanding "Water Revenue Bonds, 1959," of the City; and WHEREAS, pursuant to the provisions of Section 9 of Ordinance No. 1178, the City covenanted and agreed that it would not issue any Parity Bonds (as herein defined) unless it should first satisfy the following conditions: "(a) At the time of the issuance of such Parity Revenue Bonds there shall be no deficiency in either the Principal and Interest Account or Reserve Account of the Bond Fund. "(b) The City shall have covenanted in each or- dinance authorizing the issuance of Parity Revenue Bonds that it will establish, maintain and collect rates and charges for water (and for sanitary sewage disposal service in the event that the sanitary sewerage system of the City ever becomes a part of the Water System) for as long as any of the Bonds and any Parity Revenue Bonds are outstanding as will make available for payment of the principal of and interest on all of such bonds, as the same shall become due, an amount equal to at least 1.35 times the average annual amount required for the payment of all such principal and interest, exclusive of the principal requirements in any Term Bond Year, after necessary costs of maintenance and operation of the Water System shall have been paid, but before depreciation. "(c) The City shall have covenanted in each ordinance authorizing the issuance of Parity Revenue Bonds that it will pay into the Reserve Account of the Bond Fund within five years of the date of issuance of such Parity Revenue Bonds an amount which, with the money in the Reserve Account, will be at least equal to the next year's debt service on all outstanding bonds, the principal of and interest on which are payable out of the Bond Fund, and will further provide in each such ordinance for additional payments to be made into the Reserve Account if necessary so that there shall be on deposit therein at all times after each of those five-year periods an amount at least equal to the next succeeding year's debt service on all bonds payable out of the Bond Fund. To satisfy the Reserve Account requirement, the whole or any part of the money in any other reserve fund or account of the City created to secure the payment of the principal of or interest on any revenue bonds or revenue coupon warrants being refunded by such Parity Revenue Bonds may be transferred to the Reserve Account at the time such outstanding bonds or warrants are redeemed. "(d) At the time of the issuance of such Parity Revenue Bonds, except the 'Water Revenue Bonds, 1963, Issue No. 2,' the City shall have on file a certificate from an independent licensed pro- fessional engineer showing that in his professional opinion the net revenue of the Water System which will be available in each succeeding year for the payment of the principal of and interest on the Bonds, any Parity Revenue Bonds then outstanding, and the Parity Revenue Bonds to be issued as all of the same shall become due (except for those Bonds or any then outstanding Parity Revenue Bonds that are to be refunded by the Parity Revenue Bonds to be issued) will equal at least 1.35 times the average annual amount required for the payment of the principal of and interest on all such bonds, exclusive of the principal require- ment in any Term Bond year. "For the purpose of the engineer's certifi- cate, the words 'net revenue of the Water System which will be available . . . for the payment of the principal of and interest on all of such bonds' shall mean the gross operating revenues and receipts of the Water System after deducting therefrom all necessary expenses of maintenance and operation thereof, but before depreciation and annual debt service on all outstanding revenue bonds or revenue coupon warrants that may have a lien on the gross revenue of the Water System junior and inferior to the lien thereon for the payment of the principal of and interest on the Bonds. The net revenue may be based on any in- crease in revenues to be derived by an increase -2- in water rates and charges (and any charges for sanitary sewage disposal service should the sanitary sewerage system of the City ever be com- bined with the Water System) authorized by the City Council to be effective by the time delivery of such Parity Revenue Bonds is made." WHEREAS, pursuant to Ordinance No. 1179, the City hereto- fore issued under date of May 1, 1963, its "Water Revenue Bonds, 1963, Issue No. 2," in the principal sum of $1,000,000 for the purpose of obtaining funds to pay the cost of carrying out a system or plan of additions to and betterments and extensions of the water supply and distribution system of the City, and for the purpose of refunding all outstanding "Water Revenue Bonds, 1948," "Water Revenue Bonds, 1957," and "Water Revenue Bonds, 1958," which bonds, pursuant to the pro- visions of Section 9 of Ordinance No. 1178, were issued as Parity Bonds; and WHEREAS, pursuant to Ordinance No. 1269, the City heretofore issued under date of November 1, 1964, its "Water Revenue Bonds, 1964," in the principal sum of $1,210,000 par value for the purpose of ob- taining funds to pay the cost of carrying out the system or plan for making additions to and betterments and extensions of the existing water supply and distribution system of the City specified and adopted in Ordinance No. 1269 and for the purpose of paying the cost of excess water pipe capacity in Local Improvement Districts Nos. 245 and 246 heretofore created, which bonds, pursuant to the provisions of Section 9 of Ordinance No. 1178, were issued as Parity Bonds; and WHEREAS, pursuant to Ordinance No. 1691, the City heretofore issued $1,000,000 par value of "Water Revenue Bonds, 1970," for the purpose of obtaining a part of the funds to pay the cost of carrying out certain portions of the system or plan for making additions to and betterments and extensions of the existing water supply and distribution system of the City specified and adopted by Ordinance No. 1408 and for the purpose of paying the costs of excess water pipe capacity in Local Improvement District No. 252 heretofore created, -3- which bonds, pursuant to the provisions of Section 9 of Ordinance No. 1178, were issued as Parity Bonds; and WHEREAS, pursuant to Ordinance No. 1822, the City hereto- fore issued $1,005,000 par value of "Water Revenue Refunding Bonds, 1973," for the purpose of providing funds to redeem, pay and retire on December 1, 1985, all of its then outstanding "Water Revenue Bonds, 1970," which 1973 Refunding Bonds, pursuant to the provisions of Section 9 of Ordinance No. 1178, will be Parity Bonds after the payment and retirement of those 1970 bonds on December 1, 1985; and WHEREAS, pursuant to Ordinance No. 1967, the City heretofore issued $1,000,000 par value of "Water Revenue Bonds, 1976," for the purpose of obtaining funds to pay the cost of carrying out the system or plan for making additions to and betterments and extensions of the existing water supply and distribution system of the City specified and adopted in Ordinance No. 1967, which bonds, pursuant to the provisions of Section 9 of Ordinance No. 1178, were issued as Parity Bonds; and WHEREAS, the existing water supply and distribution system of the City is in such condition that the public interest, welfare and convenience require and it is advisable that certain additions and betterments to and extensions of such water supply and distribu- tion system be made, that the system or plan for additions and betterments to and extensions of the water supply and distribution system specified and adopted by Ordinance No. 1967 be completed, and other expenditures are necessary for the system, and that the City issue and sell its water revenue bonds in order to provide the funds necessary to carry out such improvements; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF KENT, WASHINGTON, DO ORDAIN as follows: Section 1. As used in this ordinance the following words shall have the following meanings: MC (a) "City" shall mean the City of Kent, Washington, a duly organized and existing non -charter code city under the laws of the State of Washington. (b) "Bonds" shall mean the "Water Revenue Bonds, 1978," authorized to be issued by this ordinance. (c) "Bond Fund" shall mean the "Water Revenue Bond Redemp- tion Fund, 1963," created by Ordinance No. 1178, passed April 1, 1963. (d) 111963 Bonds, Issue No. l," shall mean the "Water Revenue Bonds, 1963, Issue No. 1," authorized to be issued by Ordinance No. 1178, passed April 1, 1963. (e) 111963 Bonds, Issue No. 2," shall mean the "Water Revenue Bonds, 1963, Issue No. 2," authorized to be issued by Ordinance No. 1179, passed April 1, 1963. (f) "1964 Bonds" shall mean the "Water Revenue Bonds, 1964," authorized to be issued by Ordinance No. 1269, passed October 5, 1964. (g) "1970 Bonds" shall mean the "Water Revenue Bonds, 1970," authorized to be issued by Ordinance No. 1691, passed November 2, 1970. (h) 111973 Refunding Bonds" shall mean the "Water Revenue Refunding Bonds, 1973," authorized to be issued by Ordinance No. 1822, passed march 5, 1973. (i) "1976 Bonds" shall mean the "Water Revenue Bonds, 1976," authorized to be issued by Ordinance No. 1967, passed June 7, 1976. (j) "Parity Bonds" shall mean any revenue bonds of the City issued in accordance with the provisions of Section 9 of Ordinance No. 1178, as amended by Section 10 of this ordinance, where the City has pledged to pay the principal of and interest on such bonds out of the gross revenues of the Water System on a parity with the payments required by Ordinance No. 1178 to be made out of those revenues for the 1963 Bonds, Issue No. 1, by Ordinance No. 1179 for the 1963 Bonds, Issue No. 2, by Ordinance No. 1269 for the 1964 Bonds, by Ordinance No. 1691 for the 1970 Bonds (prior to their retirement on December 1, -5- 1985), by Ordinance No. 1822 for the 1973 Refunding Bonds (after the retirement on December 1, 1985, of the 1970 Bonds), by Ordinance No. 1967 for the 1976 Bonds, and by this ordinance for the Bonds. (k) "Term Bond Maturity Year" shall mean any calendar year or years in which the 1963 Bonds, Issue No. 1, 1963 Bonds, Issue No. 2, 1964 Bonds, 1970 Bonds, 1973 Refunding Bonds, 1976 Bonds, the Bonds or any Parity Bonds of any one issue or series mature (regardless of reservation of prior redemption rights) in an amount which is more than 1.25 times the average annual maturities of the outstanding bonds of that issue or series for three calendar years immediately preceding such calendar year or years. (1) "water System" shall mean the existing water supply and distribution system of the City as the same may be added to, improved and extended at any time hereafter for as long as the 1963 Bonds, Issue No. 1, 1963 Bonds, Issue No. 2, 1964 Bonds, 1970 Bonds, 1973 Refunding Bonds, 1976 Bonds, the Bonds and any Parity Bonds are outstanding, and which additions, improvements and extensions shall include the sanitary sewerage system of the City should it ever be combined with the water supply and distribution system in the manner authorized by law. Section 2. The City Council hereby finds that no de- ficiency exists in either the Principal and Interest Account or the Reserve Account of the Bond Fund; that provision is hereafter made for the required coverage covenant; that provision is hereinafter made for the accumulation in the Reserve Account in the Bond Fund of the required additional reserve amount; and that Walter G. Ramsey of URS Company, an independent licensed professional engineer, has certified or will certify prior to the delivery of the Bonds that the net revenues of the Water System will be sufficient to meet the 1.35 coverage requirement in Section 9 of Ordinance No. 1178 as evidenced by his certificate to such effect to be on file with the City Clerk, such certifying engineer having taken into consideration am the fact that no debt service payable out of the net revenues of the Water System will arise for the 1973 Refunding Bonds until after December 1, 1985, and that debt service payable out of such revenues for the outstanding 1970 Bonds to be refunded will continue only until December 1, 1985, at which time the outstanding 1970 Bonds will be paid and retired and debt service on the 1973 Refunding Bonds payable out of such revenues will then commence on such date. Section 3. The City hereby specifies and adopts the following system or plan for making additions and betterments to and extensions of the Water System: (a) Construct and install a transmission main between South 98th Street and South 244th Street; (b) Construct and install a water main between South 118th Street and South 284th Street; (c) Construct and install a water main along 256th Avenue; (d) Construct Phase III of the Kent Springs chlorination project; (e) Improve and upgrade the telemetric equip- ment of the Water System; (f) Construct and install various service extensions; and (g) Construct the Kent Springs improvement. All of the above shall include all valves, connections, equipment, materials and property and property rights acquisition necessary to carry out the purposes of the system or plan, and shall be in accor- dance with the plans and specifications prepared or to be prepared by the City Engineer and URS Company, consulting engineers. The City reserves the right to make such changes in such system or plan as long as those changes do not affect the purposes of the system or plan. In addition, the City shall bring up-to-date its Water System comprehensive plan by such engineering and other studies and work as may be necessary or appropriate. The estimated cost of such system or plan, updating the Water System comprehensive plan, and completing the system or plan -7- specified and adopted by Ordinance No. 1967 is hereby declared to be $2,000,000. Section 4. For the purpose of providing the funds to carry out the system or plan specified and adopted in Section 3 hereof and hereby ordered to be carried out, updating the Water System compre- hensive plan and completing the carrying out of the system or plan specified and adopted by Ordinance No. 1967, there shall be issued and sold $2,000,000 par value of the Bonds, heretofore defined and designated as the "Water Revenue Bonds, 1978," of the City. The Bonds shall be in denominations of $5,000 each, shall be numbered from 1 to 400, inclusive, shall be dated October 1, 1978, shall bear interest at the rates hereinafter set forth, payable semiannually on each succeeding April 1 and October 1, interest to maturity to be evidenced by coupons to be attached to the Bonds, with full obliga- tion on the part of the City to pay interest at the Bond rate from and after the Bond maturity dates until the Bonds with interest are paid in full or funds sufficient to pay such Bonds with interest in full are on deposit in the Bond Fund and the Bonds have been duly called for redemption. The Bonds shall be numbered, shall bear interest and shall mature on October 1 of each year in accordance with the following schedule: Bond Numbers Interest Maturity (Inclusive) Amounts Rates Years 1 to 5 $25,000 5.500 1981 6 to 10 25,000 5.50 1982 11 to 15 25,000 5.50 1983 16 to 20 25,000 5.50 1984 21 to 26 30,000 5.50 1985 27 to 32 30,000 5.50 1986. 33 to 38 30,000 5.50 1987 39 to 45 35,000 6.00 1988 46 to 52 35,000 6.00 1989 5.3 to. 60 40,000 6.00 1990 61 to 68 40,000 6.00 1991 69 to 77 45,000 6.00 1992 1993 78 to 86 45,000 6.00 1994 87 to 96 50,000 6.05 6.10 1995 97 to 106 50,000 107 to 117 55,000 6.15 1996 118 to 129 60,000 6.20 1997 1998 130 to 141 60,000 6.25 1999 142 to 171 150,000 6.30 2000 172 to 247 380,000 6.35 2001 248 to 327 400,000 6.40 6.40 2002 328 to 400 365,000 Both principal of and interest on the Bonds shall be payable in lawful money of the United States of America at the office of the Treasurer of the City, or, at the option of the holder, at either fiscal agency of the State of Washington in Seattle, Washington, or New York, New York. The Bonds shall be payable solely out of the Bond Fund, and shall be a valid claim of the holder thereof only as against that fund and the fixed amount of the gross revenues of the Water System pledged to such fund, and shall not be a general obliga- tion of the City. Section 5. The City reserves the right to redeem the Bonds as a whole, or in part in inverse numerical order, with funds from any source on October 1, 1988, at a price of 102% of par (plus accrued interest to date of redemption), the redemption price to reduce 1/2 of 1% annually to par on or after October 1, 1992. Notice of any call for redemption of any of the Bonds prior to their stated maturity dates shall be published at least once in the official newspaper of the City not less than thirty nor more than forty-five days prior to the call date. Notice of such in- tended redemption shall also be mailed to Foster & Marshall Inc. at its principal place of business in Seattle, Washington, or its successor, not less than thirty nor more than forty-five days prior to the call date. In addition, such redemption notice shall be mailed to Moody's Investors Service, Inc., and Standard & Poor's Corporation, at their offices in New York, New York, but the mailing of such notice to such New York corporations shall not be a condition pre- cedent to the redemption of such Bonds. Interest on any Bonds so called for redemption shall cease on the date fixed for such redemp- tion upon payment of the redemption price into the Bond Fund. The City further reserves the right to purchase any or all of the Bonds in the open market at any time at a price not in excess of the call price applicable for such Bonds on the next call date, plus accrued interest. cm Section 6. The Bond Fund has, by Ordinance No. 1178, been divided into a Principal and Interest Account and a Reserve Account. So long as any of the Bonds is outstanding against the Bond Fund the Treasurer of the City shall set aside and pay into the Bond Fund, in addition to the amounts covenanted to be paid therein by Ordinance No. 1178 for the 1963 Bonds, Issue No. 1, by Ordinance No. 1179 for the 1963 Bonds, Issue No. 2, by Ordinance No. 1269 for the 1964 Bonds, by Ordinance No. 1691 for the 1970 Bonds (until the same are paid and retired on December 1, 1985), by Ordinance No. 1822 for the 1973 Refunding Bonds (after the payment and retirement of the 1970 Bonds on December 1, 1985), and by Ordinance No. 1967 for the 1976 Bonds, out of the gross revenues of the Water System, a fixed amount, without regard to any fixed proportion, on or before the 20th day of each month beginning with the month of October, 1978, as follows: (a) There shall be paid into the Principal and Interest Account an amount equal to at least 1/12th of the amount due on the next principal payment date and an amount equal to at least 1/6th of the in- terest to become due and payable on the next interest payment date on all of the Bonds out- standing. (b) There shall be paid into the Reserve Account, in substantially equal monthly payments and to be accumulated in full by no later than October 1, 1983, an amount which, with the money in the Reserve Account, will be at least equal to the maximum annual debt service on all then outstanding bonds payable from the Bond Fund but not less than the next year's debt service on all outstanding bonds payable out of the Bond Fund, and the City further covenants that additional payments shall be made into the Reserve Account if necessary so that there shall be on deposit therein at all times after such five year period an amount at least equal to the next succeeding year's debt service on all bonds payable out of the Bond Fund until there is a sufficient amount in the Principal and Interest Account and the Reserve Account to pay the principal of, call premium, if any, and interest on all bonds payable out of the Bond Fund outstanding at which time the money in the Reserve Account may be used to pay such principal, call premium, if any, and interest. In the event that there shall be a deficiency in the Principal and Interest Account to meet maturing installments of either principal or interest, as the case may be, on any bonds payable out -10- of the Bond Fund, such deficiency shall be made up from the Reserve Account by withdrawal of cash therefrom for that purpose. Any deficiency created in the Reserve Account by reason of any such with- drawals shall then be made up from the money from the revenues of the Water System first available after making necessary provisions for the required payments into the Principal and Interest Account. All money in the Reserve Account may be kept on deposit in the official bank depository of the City, or may be invested in direct obligations of the United States Government, having a guaranteed redemption price prior to maturity or maturing not later than twelve years from the date of purchase, and, in no event, maturing later than the last maturity of any bonds payable out of the Bond Fund outstanding at the time of such purchase. Interest earned on any such investment or on such bank deposit shall be deposited in and become part of the Reserve Account until the total required reserve amount shall have been accumulated therein, after which such interest shall be deposited in the Principal and Interest Account. In no event shall any money in the Bond Fund or any other money reasonably expected to be used to pay principal and/or interest on the Bonds be invested at a yield which would cause the Bonds to be arbitrage bonds within the meaning of Section 103(c) of the United States Internal Revenue Code of 1954, as amended, and applic- able regulations thereunder. Section 7. The gross revenues of the Water System of the City are hereby pledged to the payments as are required by this ordinance, and the Bonds shall constitute a charge or lien upon such revenues prior and superior to any other charges whatsoever, excluding charges for operation and maintenance, except that the charge or lien upon such gross revenues for the Bonds shall be on a parity with the charge or lien upon such gross revenues for the 1963 Bonds, Issue No. 1, the 1963 Bonds, Issue No. 2, the 1964 Bonds, the 1970 Bonds prior to their payment and retirement on December 1, 1985, the 1973 -11- Refunding Bonds after the payment and retirement of the outstanding 1970 Bonds on December 1, 1985, the 1976 Bonds, and for any Parity Bonds. Section 8. In the judgment of the City Council the gross revenues and benefits to be derived from the operation and maintenance of the Water System at the rates to be charged for water furnished on the entire utility will be more than sufficient to meet all expenses of operation and maintenance thereof and the debt service on the 1963 Bonds, Issue No. 1, the 1963 Bonds, Issue No. 2, the 1964 Bonds; the 1970 Bonds (prior to the payment and retirement of such out- standing 1970 Bonds on December 1, 1985), the 1973 Refunding Bonds (after the payment and retirement of the outstanding 1970 Bonds on December 1, 1985), and the 1976 Bonds, and to permit the setting aside into the Bond Fund out of the gross revenues of the Water System of amounts sufficient to pay the interest on the Bonds as such interest becomes payable and to pay and redeem all of the Bonds at maturity. The City Council and corporate authorities of the City further hereby declare that in creating the Bond Fund and in fixing the amounts to be paid into the same as aforesaid they have exercised due regard for the cost of operation and maintenance of the Water System and the debt service requirements of the presently outstanding bonds above referred to, and the City has not bound and obligated itself to set aside and pay into the Bond Fund a greater amount or pro- portion of the revenues of the Water System than in the judgment of the City Council will be available over and above such costs of operation and maintenance and debt service requirements of such out- standing bonds and that no portion of the Water System has been previously pledged for any indebtedness other than the outstanding bond issues above referred to. Section 9. The City covenants and agrees with the owner and holder of each bond at any time outstanding, as follows: -12- (a) It will establish, maintain and collect such rates and charges for water service (and for sanitary sewage disposal service should the sani- tary sewerage system of the City ever be combined with the Water System) so long as any Bonds are outstanding as will make available (1) for the payment of the principal of and interest on the outstanding 1963 Bonds, Issue No. 1, 1963 Bonds, Issue No. 2, 1964 Bonds, 1970 Bonds, 1976 Bonds, the Bonds and any Parity Bonds as the same shall become due an amount equal to at least 1.35 times the average annual amount required for the payment of all principal of and interest on such bonds for mandatory sinking fund payments, and for mandatory bond redemptions prior to maturity, exclusive of the principal requirement in any Term Bond Maturity Year (unless the ordinance authorizing the issuance of any such bonds requires that the rate coverage obligation apply to the principal amount in a Term Bond Maturity Year), after necessary costs of maintenance and operation of the Water System shall have been paid, but before depreciation, until the outstanding 1970 Bonds are paid and retired on December 1, 1985, and (2) thereafter for the pay- ment of the principal of and interest on the outstanding 1963 Bonds, Issue No. 1, 1963 Bonds, Issue No. 2, 1964 Bonds, 1973 Refunding Bonds, 1976 Bonds, the Bonds and any Parity Bonds an amount equivalent to at least 1.35 times the average annual amount required for the payment of all principal of and interest on such bonds for man- datory sinking fund payments, and for mandatory bond redemptions prior to maturity, exclusive of the principal requirement in any Term Bond Maturity Year (unless the ordinance authorizing the issuance of any such bonds requires that the rate coverage obligation apply to the principal amount in a Term Bond Maturity Year), after necessary costs of maintenance and operation of the Water System shall have been paid, but before depreciation. The 1.35 coverage requirement in this paragraph shall apply to the principal of the Bonds maturing in the years 1999 to 2001, inclusive. (b) It will at all times maintain and keep the Water System and all additions thereto. and better- ments, replacements and extensions thereof in. good repair, working order and condition and also will at all times operate the Water System and the business in connection therewith in an efficient manner and at a reasonable cost. (c) It will not sell, lease, mortage, or in any manner encumber or dispose of all of the pro- perty of the Water System unless provision is made for payment into the Bond Fund of a sum sufficient to pay the principal of and interest on all bonds payable from the Bond Fund at that time outstanding, and it will not sell, lease, mortgage, or in any manner encumber or dispose of any part of the prop- erty of the Water System unless provision is made for replacement thereof or for payment into the Bond Fund of the total amount of revenue received, which shall not be less than an amount which shall bear the same ratio to the amount of outstanding bonds payable from the Bond Fund as the revenue available for debt service for those outstanding -13- bonds for the twelve months preceding such sale, lease, mortgage, encumbrance, or disposal from the portion of the Water System sold, leased, mortgaged, encumbered or disposed of bears to the revenue available for debt service for such bonds from the entire Water System for the same period. Any money so paid into the Bond Fund shall be used to retire such outstanding bonds at the earliest possible date. (d) It will while any of the Bonds remain out- standing, keep proper and separate accounts and records in which complete and separate entries shall be made of all transactions relating to its Water System and it will furnish the original purchaser or purchasers of the Bonds or any subsequent holder or holders thereof at the written request of such holder or holders, complete operating and income statements of the Water System in reasonable detail covering any calendar year not more than ninety days after the close of such calendar year. It will grant any holder or holders of at least twenty-five percent of the outstanding Bonds the right at all reasonable times to inspect the Water System and all records, accounts and data of the City relating thereto. Upon the request of any holder of any of the Bonds, it will furnish such holder a copy of the most recently completed audit of the City's accounts by the State Auditor of Washington. (e) It will not furnish any water (or any sani- tary sewage disposal service should the sanitary sewerage system ever be combined with the Water System) to any customer whatsoever free of charge, and it will promptly take legal action to enforce the collection of all delinquent accounts. (f) It will carry the types of insurance on its Water System properties in the amounts normally carried by private water companies engaged in the operation of water systems, and the cost of such insurance shall be considered a part of operating and maintaining the Water System. If, as, and when the United States of America or some agency thereof shall provide for war risk insurance, the City further agrees to take out and maintain such insurance on all or such portions of the Water System on which such war risk insurance may be written in an amount or amounts to cover adequately the value thereof. (g) It will pay all costs of maintenance and operation of the Water System and the debt service requirements for the outstanding 1963 Bonds, Issue No. 1, 1963 Bonds, Issue No. 2, 1964 Bonds, 1970 Bonds (prior to their redemption on December 1, 1985), 1973 Refunding Bonds (after the payment and retirement of the outstanding 1970 Bonds on December 1, 1985), 1976 Bonds, the Bonds and any Parity Bonds and otherwise meet the obligations of the City as herein set forth. (h) It will make no use of the proceeds of the Bonds or other funds of the City at any time during the term of the Bonds which, if such use had been -14- reasonably expected at the date that the Bonds are issued, would have caused such Bonds to be arbitrage bonds within the meaning of Section 103(c) of the United States Internal Revenue Code of 1954, as amended, and applicable regulations thereunder. Section 10. Section 9 of Ordinance No. 1178 is amended to read as follows: The City covenants and agrees with the holder or holder and owner of each bond payable from the Bond Fund at that time out- standing that it will .ot issue any Parity Bonds unless it shall first satisfy the following conditions: (a) At the time of the issuance of such Parity Revenue Bonds there shall be no deficiency in either the Principal and Interest Account or Reserve Account of the Bond Fund. (b) The City shall have covenanted in each ordinance authorizing the issuance of Parity Revenue Bonds that it will establish, maintain and collect rates and charges for water (and for sanitary sewage disposal service in the event that the sanitary sewerage system of the City ever becomes a part of the Water System) for as long as any of the Bonds and any Parity Revenue Bonds are out- standing as will make available for payment of the principal of and interest on all of such bonds, for mandatory sinking fund payments, and for man- datory bond redemptions prior to maturity-, as the same shall become due, an amount equal to at least 1.35 times the average annual amount required for such payments, exclusive of the principal require- ments for any Term Bond Maturity Year (unless the ordinance authorizing the issuance of any such bonds requires that the rate coverage obligation apply to the principal amount in a Term Bond Maturity Year), after necessary costs of main- tenance and operation of the Water System shall have been paid, but before depreciation. The ordinance authorizing such additional Parity Bonds shall require that the payment of all such bonds maturing in a Term Bond Maturity Year shall be provided for by either a mandatory sinking fund or by mandatory redemption thereof on or before their maturity. (c) The City shall have covenanted in each or - dinance authorizing the issuance of Parity Revenue Bonds that it will pay into the Reserve Account of the Bond Fund within five years of the date of issuance of such Parity Revenue Bonds an amount which, with the money in the Reserve Account, will be at least equal to the maximum annual debt ser- vice on all then outstanding bonds payable from the Bond Fund but not less than the next year's debt service on all outstanding bonds, the principal of and interest on which are payable out of the Bond Fund, and will further provide in each such ordinance for additional payments to be made into the Reserve Account if necessary so that there shall be on deposit therein at all times after each of those five year periods an amount at -15- least equal to the next succeeding year's debt service on all bonds payable out of the Bond Fund. To satisfy the Reserve Account requirement, the whole or any part of the money in any other re- serve fund or account of the City created to secure the payment of the principal of or interest on any revenue bonds or revenue coupon warrants being refunded by such Parity Revenue Bonds may be transferred to the Reserve Account at the time such outstanding bonds or warrants are redeemed. (d) At the time of the issuance of such Parity Revenue Bonds, except the "Water Revenue Bonds, 1963, Issue No. 2," the City shall have on file a certificate from an independent licensed professional engineer showing that in his professional opinion the net revenue of the Water System which will be avail- able in each succeeding year for the payment of the principal of and interest on, mandatory sinking funds of, and mandatory redemptions of the Bonds, all bonds payable from the Bond Fund then outstanding and the Parity Revenue Bonds to be issued as all of the same shall become due (except for those Bonds or any then outstanding Parity Revenue Bonds that are to be refunded by the Parity Revenue Bonds to be issued) will equal at least 1.35 times the average annual amount required for such payments, exclusive of the principal requirement in any Term Bond Maturity Year (unless the ordinance authorizing the issuance of any such bonds requires that the rate coverage obligation apply to the principal amount in a Term Bond Maturity Year). For the purpose of the engineer's certificate, the words "net revenue of the Water System which will be available . . . for the payment of the principal of and interest on all of such bonds" shall mean the gross operating revenues and receipts of the Water System after deducting therefrom all necessary ex- penses of maintenance and operation thereof, but before depreciation and annual debt service on all outstanding revenue bonds or revenue coupon warrants that may have a lien on the gross revenue of the Water System junior and inferior to the lien thereon for the payment of the principal of and interest on the Bonds. The net revenue may be based on any increase in revenues to be derived by an increase in water rates and charges (and any charges for sanitary sewage disposal service should the sanitary sewerage system of the City ever be combined with the Water System) authorized by the City Council to be effective by the time delivery of such Parity Revenue Bonds is made. Nothing contained in this section shall prevent the City from issuing revenues bonds or warrants, the payment of the principal of and interest on which is a charge upon the gross revenues of the Water System junior and inferior to the payments required to be made out of such gross revenues into the Bond Fund. -16- Section 11. The gross revenues from the operation of the Water System shall be allocated as follows: (a) To pay the necessary costs of operation and maintenance of the Water System; (b) To make all required payments into the Bond Fund in amounts sufficient to pay principal and interest as the same shall become due on all bonds payable out of the Bond Fund; (c) To make all payments required to be made into the Reserve Account in the Bond Fund; (d) To make all payments required to be made into the bond redemption funds for any junior lien water revenue bonds hereafter issued; (e) To make necessary additions, betterments and improvements and repairs to or extensions and replacements of the Water System, or for any other proper purposes connected with the operation of the Water System for which such money may be lawfully used; and (f) To retire by redemption or purchase water revenue bonds of the City outstanding as authorized in various bond ordinances of the City. Section 12. The Bonds shall be printed on lithographed forms, the Bonds and coupons shall be in a form consistent with the provisions of this ordinance, the Bonds shall be signed by the facsimile signature of the Mayor and attested by the manual signature of the City Clerk and shall have the seal of the City affixed thereto or printed in facsimile thereon, and the interest coupons shall bear the facsimile signatures of the Mayor and the City Clerk. Section 13. In the event the City shall issue advance refunding bonds pursuant to the laws of the State of Washington, or have money available from any other lawful source, to pay the principal of and interest on the Bonds or such portion thereof included in the refunding plan as the same become due and payable and to refund all such then outstanding Bonds and to pay the costs of refunding, and shall have irrevocably set aside for and pledged to such payment and refunding, money and/or direct obligations of the United States of America or other legal investments sufficient in amount, together with known earned income from the investments thereof, to make such payments and to accomplish the refunding as scheduled (hereinafter -17- called the "trust account") and shall irrevocably make provisions for redemption of such Bonds, then in that case all right and interest of the owners or holders of the Bonds to be so retired or refunded and the appurtenant coupons (hereinafter collectively called the "defeased Bonds") in the covenants of this ordinance, in the gross revenues of the Water System, funds and accounts obligated to the payment of such Bonds shall thereafter cease and become void, except such owners and holders shall have the right to receive payment of the principal of and interest on the defeased Bonds from the trust account and, in the event the funds in the trust account are not available for such payment, shall have the residual right to receive payment of the principal of and interest on the defeased Bonds from the gross revenues of the Water System without any priority of lien or charge against such revenue or covenants with respect thereto except to be paid therefrom. After the establishing and full funding of such trust account, the City may then apply any money in any other fund or account established for the payment or redemption of the defeased Bonds to any lawful purposes as it shall determine, subject only to the rights of the holders of any other bonds then outstanding. In the event that the refunding plan provides that the Bonds being refunded or the refunding bonds to be issued be secured by cash and/or direct obligations of the United States of America or other legal investments pending the prior redemption of those Bonds being refunded and if such refunding plan also provides that certain cash and/or direct obligations of the United States of America or other legal investments are irrevocably pledged for the prior redemp- tion of those Bonds included in the refunding plan, then only the debt service on the Bonds which are not defeased Bonds and the refunding bonds, the payment of which is not so secured by the re- funding plan, shall be included in the computation of coverage for issuance of Parity Bonds and the annual computation of coverage for determining compliance with the rate covenants. �� Section 14. Foster & Marshall Inc. of Seattle, Washington, e heretofore offered to purchase the Bonds at a price of $9 9, per each $100.00 par value, plus accrued interest from the date of issuance to the date of delivery of the Bonds, the City to furnish the printed Bonds and the unqualified approving legal opinion of Messrs. Roberts, Shefelman, Lawrence, Gay & Moch, municipal bond counsel of Seattle, Washington, at the City's expense. Bond counsel shall not be required to review or express any opinion concerning any official statement, offering circular or other sales material issued or used in connection with the Bonds, ,end bond counsel's opinion shall so state. The City Council, being of the opinion that no better price could be obtained for the Bonds and that it was in the best interests of the City to accept the same, accepted such offer on September 18, 1978, and such acceptance is hereby ratified and confirmed. The Bonds shall immediately upon their execution be delivered to the purchaser upon payment for the Bonds in accordance with such offer. The City Treasurer is hereby authorized and directed to deposit the accrued interest received from the sale of the Bonds in the Principal and Interest Account in the Bond Fund and to deposit and make use of the principal proceeds received in the manner set forth in this ordinance. Interest earned on any investment of the principal proceeds shall be deposited into the construction fund into which the principal proceeds are deposited. Section 15. This ordinance shall take effect five days after its passage, approval and publication as provided by law. PASSED by the City Council of the City of Kent, Washington, and APPROVED by its Mayor, at a regular open public meeting held on the -.2�, day of October, 1978. ATTEST: Mayor City erk ORM APPROVED: city attorney 7e s 1 � � -19-